UPS United Parcel Service Weekly Chart; 20/50 MA Cross

One of Keystone's long-term market signals is the UPS 20/50-week MA cross. When markets are headed for an extended period of down, the shippers such as United Parcel and FedEx should roll over lower to verify the drop in business activity. Contracts, parts and consumer products are shipped 24/7 so obviously the shippers are busier than a one-armed paper hanger during strong economic times but are sitting at the loading dock twiddling thumbs when the country slips into recession.

The 20-week MA stabbed down through the 50 in May of last year forecasting trouble ahead but the increased economic activity due to reduced regulations and the tax-cut package helped to support the economy and create further business activity. In August of last year, the 20 crossed above the 50 signaling good times ahead for the economy and stock market.

You can see the dramatic crash off the late January top and in May the 20 again stabbed down through the 50 forecasting trouble ahead. Price chops along this year and over the last seven weeks breaks out strongly higher. The analysts are touting the stock as the greatest thing since sliced bread. The bulls that believe in a strong economy ahead feel it is a no-brainer to buy UPS with both hands since it has nowhere to go but up. CNBC commentator Jim Cramer tells investors to "just buy it!" The hype sends the stock higher.

However, the earnings release in late July only beat by the proverbial penny and top line revenue only slightly edged out expectations. At the same time, executives dumped over $1 million in stock since early July.

For the extended down move to occur in the US stock market, UPS will need to retreat and roll the 20 MA over to the downside. Interestingly, the pull backs in UPS occur quite suddenly and dramatically as evidenced by early 2017, early this year, in March and in June. When it turns, it typically turns fast. The 20 MA cannot roll over to the downside until price drops below the moving average.

Keep this chart on your radar. As the weeks and months play out into the end of the year, watch to see if the 20/50 negative cross occurs. If so, it will likely remain negative for a long time this time and forecast long-term stock market weakness. For now, the wine is flowing like water and traders are tripping over each other to buy shares at the ask. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.